By Deepak Jasani
Indian equity markets have delivered a stellar performance since the last samvat, generating substantial wealth for investors. Though the Nifty was just up 9.4%, the broader markets performed well. Nifty Smallcap 100 and Nifty Midcap 100 indices rose 34% and 29% respectively.
Among sectors, PSU Bank index rose 44% and Realty rose 37% while Oil & Gas index was the only one to end in the negative (-2%).
Indian markets did well in most months aided by the FPI flows (some diversion from China) and local flows (that are now becoming dominant) except in early part of the calendar due to Covid resurgence fears in China, subdued Dec quarter results and Adani group revealations.
The remarkable performance of the Indian economy and equity markets in the last year has underscored the country’s potential as a significant player in the global financial landscape, inviting both domestic and international capital to participate in its growth story.
A lot of Global financial institutions and brokerages upgraded the GDP forecast for India while downgrading that of several other countries/regions.
JP Morgan will add Indian Gsec to its Government Bond Index-Emerging Markets suite of fixed income benchmarks commencing 28 June 2024 with a maximum index
weight of 10%.
As we look ahead, the central bankers, Finance ministries as well as investors will struggle with inflation that is proving to be sticky so far (led by supply issues in commodities) and the resultant high interest rates. If this situation does not resolve soon, global economic slowdown cannot be averted. The new conflict in the Middle east (Israel-Hamas) in addition to the existing Russia-Ukraine conflict could divert resources, attention and curb risk appetite of investors globally.
Rising bond yields are impacting equity market valuations and corporate profitability. It is essential for investors and companies to adapt to changing economic conditions and market dynamics to navigate these challenges effectively.
Indian Macros like GST Collections, Direct tax collections, PMI Manufacturing and services, Current account deficit etc remain positive while fiscal deficit and uneven spread of rainfall on foodgrain production, inflation and rural incomes need to be watched closely.
Going forward, we expect markets to be volatile till the 1st half of 2024 even as the outcome of state and Central elections will be watched closely as would be the repercussions of the two geo political events. Though the local fund inflows have remained robust, we would need resumption of FPI flows once the global risk appetite revives. We continue to favour domestic oriented businesses and favour opportunities in the sectors like Materials, Pharma, Oil & Gas, Small Finance banks, Petrochemicals, Consumption, Power EPC and restructuring plays for the next year. These stocks have robust fundamentals and some margin of safety in their valuation to offer superior returns to investors. With a focus on these themes, here are our 10 picks for Samvat 2080.
(Deepak Jasani is Head of Retail Research at HDFC securities Ltd. Views expressed are the author’s own. Please consult your financial advisor before investing.)
